Case Law Details
Smt. Srilatha Bobbala Vs ITO (ITAT Hyderabad)
Addition on Property Investment Sent Back Because Facts Needed Verification; ITAT Restores Case Because Property Advance Evidence Was Incomplete; Unexplained Investment Addition Reopened Because Bank Entries Were Unclear; ITAT Sets Aside CIT(A) Order Because Assessment Was Not Ex Parte.
The Income Tax Appellate Tribunal (ITAT), Hyderabad condoned a delay of 182 days in filing an appeal by the assessee for Assessment Year 2015-16 after considering medical evidence showing that the assessee suffered severe liver complications, underwent unsuccessful liver transplantation surgery, and required continuous dialysis treatment. Relying on the Supreme Court decision in Vidya Shankar Jaiswal v. CIT, the Tribunal held that a liberal and justice-oriented approach should be adopted while considering condonation of delay applications.
The dispute concerned an addition of Rs.22,25,000/- made by the Assessing Officer (AO) as unexplained investment in immovable property. The assessee had not filed a return of income under section 139 of the Income Tax Act. Based on information regarding lease transactions and property purchase of Rs.37,25,000/-, reassessment proceedings under section 147 were initiated. During assessment, the assessee explained that Rs.15 lakh came from a loan obtained from Gramin Bank and the remaining Rs.22.25 lakh was received as advance from Shri Benaveni Ramaswamy under an agreement for sale of property. The AO accepted the source of Rs.15 lakh but rejected the explanation for the balance amount, observing that the assessee failed to produce supporting documents regarding the sale agreement, mode of receipt and repayment of advance, and reasons for cancellation of the property deal. The amount of Rs.22.25 lakh was therefore added as unexplained investment.
Before the Tribunal, the assessee relied on a confirmation letter from Shri Benaveni Ramaswamy acknowledging payment of Rs.23 lakh as advance towards purchase of property. The assessee also produced documents relating to land acquisition compensation received by Shri Benaveni Ramaswamy and his bank statement showing withdrawal and transfer entries on 17.01.2014. It was further submitted that the proposed property transaction did not materialize and an amount of Rs.25 lakh including interest was repaid to Shri Benaveni Ramaswamy on 08.11.2021.
The Department contended that the assessee had failed to authenticate the alleged agreement of sale, establish the mode of receiving and repaying the advance, or explain cancellation of the transaction. It was also pointed out that the assessee did not make substantive submissions before the Commissioner of Income Tax (Appeals) and only sought adjournments.
The Tribunal observed that the bank statement produced by the assessee required further factual verification because it was unclear whether the transfer entry of Rs.11 lakh reflected payment to the assessee or another person. The Tribunal also noted that no documentary evidence regarding cancellation of the alleged property transaction had been furnished and that repayment claimed by the assessee occurred after the assessment order dated 09.09.2021. The ITAT further held that the Commissioner of Income Tax (Appeals) incorrectly invoked powers under the proviso to section 251(1)(a) because the assessment order was not an ex parte assessment order.
Considering the overall facts and circumstances, the Tribunal set aside the order of the Commissioner of Income Tax (Appeals) and restored the matter to the file of the AO for fresh adjudication after proper factual verification and opportunity of hearing to the assessee. The assessee was permitted to file additional evidence and directed to cooperate in reassessment proceedings without seeking unnecessary adjournments. The appeal was allowed for statistical purposes.
FULL TEXT OF THE ORDER OF ITAT HYDERABAD
This appeal is filed by Smt. Srilatha Bobbala (“the assessee”), feeling aggrieved by the order passed by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi (“Ld. CIT(A)”) dated 17.01.2025 for the A.Y.2015-16.
2. At the outset, it is observed that there is a delay of 182 days in filing the present appeal before this Tribunal. In this regard, the assessee has filed a condonation petition along with an affidavit explaining the reasons for delay in filing the appeal. The Learned Authorized Representative (“Ld. AR”) submitted that the liver functioning of the assessee got severely damaged due to which the assessee had to undergo liver transplantation surgery. However, the said transplantation was not successful and thereafter the assessee had to undergo daily dialysis procedures during the relevant period. The Ld. AR further submitted that due to the said serious medical complications and continuous treatment, the assessee could not file the appeal within the prescribed period of limitation. In support of the said contention, the assessee has also placed on record relevant medical certificates and supporting medical documents. The Ld. AR further submitted that the delay in filing the appeal was neither intentional nor attributable to any mala fide intention on the part of the assessee and the same had occurred due to circumstances which were beyond the control of the assessee. Accordingly, he prayed for condonation of the delay and admission of the appeal for adjudication on merits.
3. Per contra, the Learned Departmental Representative (“Ld. DR”) submitted that the reasons explained by the assessee are not sufficient for condonation of delay and accordingly objected to the condonation of delay and admission of the appeal.
4. We have heard the rival submissions and perused the material available on record. As submitted by the Ld. AR, the assessee was suffering from serious medical complications relating to liver failure and had undergone liver transplantation procedure which was not successful. It is also submitted that the assessee had to undergo continuous dialysis procedures during the relevant period. In our considered view, the reasons explained by the assessee constitute sufficient and reasonable cause for not filing the appeal within the prescribed period of limitation. Further, we find that the Hon’ble Supreme Court, in the case of Vidya Shankar Jaiswal v. CIT (174 taxmann.com 21), has held that a justice-oriented and liberal approach should be adopted while considering applications for condonation of delay. Respectfully following the said principle, we condone the delay of 182 days and admit the appeal for adjudication on merits.
5. The assessee has raised the following grounds of appeal:
6. The brief facts of the case are that the assessee is an individual who had not filed any return of income for Assessment Year 2015-16 under section 139 of the Income Tax Act, 1961 (“the Act”). On the basis of information available with the Learned Assessing Officer (“Ld. AO”), it came to his notice that the assessee had taken lease of M/s Mai Ratna Restaurant and Bar, Karimnagar for Rs.15 lakhs and had also purchased immovable property for Rs.37,25,000/-. Since no return of income was filed by the assessee, reassessment proceedings under section 147 of the Act were initiated and accordingly notice under section 148 of the Act was issued by the Ld. AO on 26.12.2019 to the assessee. However, the assessee did not file any return of income in response to the notice issued under section 148 of the Act. Subsequently, during the reassessment proceedings, the assessee filed written submissions before the Ld. AO explaining the source for purchase of immovable property amounting to Rs.37,25,000/-. The assessee submitted that a sum of Rs.15 lakhs was sourced through loan obtained from Gramin Bank and with respect to the balance amount of Rs.22,25,000/-, the assessee submitted that the same was received as advance from Shri Benaveni Ramaswamy towards agreement for sale of property. The Ld. AO accepted the source of Rs.15 lakhs received from Gramin Bank. However, the Ld. AO did not accept the explanation with respect to the balance amount of Rs.22,25,000/- and accordingly treated the same as unexplained investment and added the same in the hands of the assessee. Accordingly, the assessment was completed by the Ld. AO under section 147 read with section 144 of the Act vide order dated 09.09.2021 making addition of Rs.22,25,000/- and assessing the total income of the assessee at Rs.27,52,810/-.
7. Aggrieved with the order of the Ld. AO, the assessee filed appeal before the Ld. CIT(A). However, before the Ld. CIT(A), except seeking adjournments, the assessee did not file any substantive submissions. The Ld. CIT(A), treating the assessment order passed by the Ld. AO as an ex parte assessment order, invoked the proviso to section 251(1)(a) of the Act and set aside the assessment order to the file of the Ld. AO for fresh assessment.
8. Aggrieved with the order of the Ld. CIT(A), the assessee is in appeal before this Tribunal. At the outset, the Ld. AR submitted that the solitary issue arising out of the grounds of appeal filed by the assessee is with regard to the addition of Rs.22,25,000/- made by the Ld. AO. The Ld. AR submitted that the assessee had received advance of Rs.23,00,000/- from Shri Benaveni Ramaswamy and utilized the same for purchase of immovable property amounting to Rs.37,25,000/-. The Ld. AR submitted that despite availability of sufficient evidences, the Ld. AO wrongly added the said amount in the hands of the assessee. Inviting our attention to the confirmation letter issued by Shri Benaveni Ramaswamy placed at page no. 118 of the paper book, the Ld. AR submitted that Shri Benaveni Ramaswamy had categorically admitted through the said confirmation that he had paid advance amount of Rs.23 lakhs to the assessee towards purchase of property. The Ld. AR further invited our attention to the list of persons residing at Koheda Mandal, Siddipet District, from whom lands were acquired (page nos. 123 to 125 of the paper book) and demonstrated that the lands belonging to Shri Benaveni Ramaswamy were also acquired. The Ld. AR also invited our attention to the bank account of Shri Benaveni Ramaswamy placed at page no.120 of the paper book and submitted that Shri Benaveni Ramaswamy had received compensation amount of Rs.23,45,576/- on account of land acquisition. Referring to the said bank statement, the Ld. AR submitted that on 17.01.2014 there was withdrawal of Rs.23,45,000/-, out of which Shri Benaveni Ramaswamy had advanced amount to the assessee. The Ld. AR further submitted that the deal of property with Shri Benaveni Ramaswamy could not materialize and accordingly the assessee had repaid an amount of Rs.25 lakhs including interest to Shri Benaveni Ramaswamy on 08.11.2021. The Ld. AR submitted that despite availability of all these details, the Ld. AO made the impugned addition which is not justified. He further submitted that even before the Ld. CIT(A), though sufficient material was available on record, the issue was not adjudicated on merits and was simply restored to the file of the Ld. AO. Accordingly, the Ld. AR prayed for deletion of the addition made by the Ld. AO.
9. Per contra, the Ld. DR relied upon the orders of the lower authorities. Inviting our attention to page no.2 of the assessment order, the Ld. DR submitted that the assessee could not produce supporting documents with respect to the agreement of sale of property with Shri Benaveni Ramaswamy and also could not authenticate the said agreement before the Ld. AO. The Ld. DR further submitted that the assessee also failed to produce evidence regarding the mode of receiving the advance and return back of the said advance amount. The assessee also failed to establish as to why the alleged property deal was cancelled. The Ld. DR further submitted that despite various opportunities granted by the Ld. CIT(A), the assessee failed to file any submissions before the Ld. CIT(A). Accordingly, there is no infirmity in the order of the Ld. CIT(A) as well as the order of Ld. AO.
10. We have heard the rival submissions and perused the material available on record. The solitary issue arising for our consideration is with regard to the addition of Rs.22,25,000/- made by the Ld. AO on account of unexplained investment in purchase of immovable property. On perusal of the record, we find that the assessee had explained before the Ld. AO that out of the total investment of Rs.37,25,000/- made towards purchase of immovable property, a sum of Rs.15 lakhs was sourced from loan obtained from Gramin Bank and the balance amount of Rs.22,25,000/- was out of advance received from Shri Benaveni Ramaswamy towards Agreement of sale of property. The Ld. AO accepted the source to the extent of Rs.15 lakhs; however, the remaining amount of Rs.22,25,000/- was treated as unexplained investment and added in the hands of the assessee. In this regard, we have gone through page no.2 of the assessment order, which is to the following effect:
11. On perusal of the above, we find that the Ld. AO has recorded the fact that the assessee could not produce supporting documents with respect to the agreement of sale of property with Shri Benaveni Ramaswamy and could not authenticate the said agreement. The assessee also could not produce evidence regarding the mode of receiving the advance and return back of the said advance. The assessee also failed to explain as to why the reported deal was cancelled. We have also gone through the bank account of Shri Benaveni Ramaswamy placed at page no.120 of the paper book , which is to the following effect:
12. On perusal of the above, we find that on 17.01.2014 there is withdrawal of cash of Rs.12,45,000/- and there also appears to be transfer entry of Rs.11 lakhs on the same date. However, on perusal of the bank statement, it is not clear as to whether the amount of Rs.11 lakhs was transferred by Shri Benaveni Ramaswamy to the assessee or to some other persons or whether the same was withdrawn by him in cash. Accordingly, the same requires factual verification at the level of the Ld. AO. We further observe that the assessee has also failed to explain before us the reasons for cancellation of the alleged property deal with Shri Benaveni Ramaswamy and no documentary evidence in support thereof has been furnished before us. We further note that the assessee has contended that the advance received from Shri Benaveni Ramaswamy was repaid on 08.11.2021 along with interest amounting to Rs.25 lakhs. However, the said repayment is stated to have been made after the date of assessment order passed by the Ld. AO on 09.09.2021. Therefore, the said contention and supporting evidences also require proper factual verification at the level of the Ld. AO. We have also gone through para nos.6 to 8 of the order of the Ld. CIT(A), which is to the following effect:
13. On perusal of the above, we observe that before the Ld. CIT(A), except seeking adjournments, the assessee did not file any substantive submissions or supporting evidences. Therefore, the Ld. CIT(A) could not adjudicate the claim of the assessee on merits. We also observe that the Ld. CIT(A) has set aside the issue to the file of the Ld. AO by invoking the proviso to section 251(1)(a) of the Act. However, on perusal of the assessment order, we find that the assessment order passed by the Ld. AO is not an ex parte assessment order. Therefore, in our considered view, invocation of powers under the proviso to section 251(1)(a) of the Act by the Ld. CIT(A) is not in accordance with law. To that extent, we set aside the order of the Ld. CIT(A). However, considering the entirety of facts and circumstances of the case, and in the interest of substantial justice, we are of the considered view that the issue requires fresh factual verification at the level of the Ld. AO. Accordingly, we set aside the issue to the file of the Ld. AO with direction to adjudicate the same afresh after providing adequate opportunity of being heard to the assessee. The assessee is also given liberty to file additional evidences in support of his claim before the Ld. AO. At the same time, the assessee is also directed not to seek unnecessary adjournments and to fully cooperate in the reassessment proceedings.
14. In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced in the Open Court on 13th May, 2026.
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